Author： Vellekoop M. H. Nieuwenhuis J. W.
Publisher： Taylor & Francis Ltd
ISSN： 1744-2508
Source： Stochastics: An International Journal of Probability and Stochastic Processes, Vol.83, Iss.4-6, 2011-08, pp. : 555-567
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Abstract
The difference between an American put option and its European counterpart has been characterized in terms of a simple integral expression which can be used to calculate the optimal exercise boundary in a recursive manner, if Black–Scholes dynamics are assumed for the underlying asset. In this paper, we extend this formula to the case where a more general stock and cumulative dividend process are included, and show how this changes the properties of the optimal exercise boundary.
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